New options trader needs help.

Discussion in 'Options' started by sebastionay, Apr 16, 2010.

  1. Thanks Carl
     
    #21     Apr 17, 2010
  2. be very very slow about options. Options writers (sellers) tend to make some money and them blow up suddenly

    Options buyers are purchasing a leaking balloon, hoping to make money.

    If you have an edge, buying & holding options is a great way to give up that edge to time decay.

    There is nothing inherently "better" about options, especially to someone newer to them. Time decay, the greeks, various strike prices, in/out of the money and other things make them more difficult to fathom.

    If you want to trade, it is better just to trade the underlying instrument. If you want leverage, you can get that on stocks or futures. You have more liquidity and less other things complicating your trade.

    If you plan to hold very short term (like a couple of hours), then not such a big deal. But it is better only to go into them when you have a LOT of knowledge and a lot more experience.

    Unless you a verifiable, tested edge given by something within options themselves, it does not make much sense.
     
    #22     Apr 17, 2010
  3. I had been wanting to learn more about options for a while as I noticed how it can give advantages in real estate, work and many other areas of business

    To be honest most of my motivation is probably coming from the greed of wanting to earn a lot of money, to have a better standard of living some of you might want to burn me for that but I think its important to be honest with myself about that so that emotions don't build up and take over when watching trades.

    And I do genuine enjoy trading and the strategy element behind it so Ill be learning about options either way I guess.
     
    #23     Apr 17, 2010
  4. These are elements I have been thinking about a lot with forex although obviously its more important with options.

    I suppose another question of mine though is are options better when you do know about them than other methods of investment.

    I thought that people find more success in options vs forex even though they are predominantly used as insurance for other positions.

    Am I wrong in thinking that? Ive noticed much talk of options manipulation in the forum so far.

    Any recommendations for a free options demo platform?

    Ive been rejected by some american ones because the ones ive tried to join only allow US residents or aliens living inside US.
     
    #24     Apr 17, 2010
  5. drcha

    drcha

    I would add here: Yes, but.

    It is quite possible to make 10% per month with several types of trades. John is saying that such trades are always going to be very risky, and he is absolutely right about that. But, it is fine to participate in these types of trades, once you understand them thoroughly, with a very small portion of your portfolio. You'll need more cash than what you have described to do this. Five to ten percent of $1K is only $50-100. Can't do much with that.

    I recommend:
    -Options for Rookies by Mark Wolfinger
    -Options as a Strategic Investment by Larry McMillan
    -Following the markets you want to trade every single day, even if you are not currently in them
     
    #25     Apr 17, 2010
  6. Quote from sebastionay:

    These are elements I have been thinking about a lot with forex although obviously its more important with options.

    I suppose another question of mine though is are options better when you do know about them than other methods of investment.

    Forex are a terrible thing to trade for most at-home traders, especially those with only a few years expereince. They are very efficient and highly traded by large institutions. Sort of like stock index futures (DAX, Dow, Nikkei, etc.). I would caution you to stick to trading pure stocks or if you cannot get leverage that way, perhaps non-index futures.

    I thought that people find more success in options vs forex even though they are predominantly used as insurance for other positions.

    That has little to do with options, it is just that it is hard to make money in forex. There is a general belief that 95% of traders blow out, lose money, break even or make little in trading leveraged. I suspect forex and stock index instrument traders do far worse
     
    #26     Apr 17, 2010
  7. Mark
     
    #27     Apr 17, 2010
  8. Thanks for taking the time Mark

    Firstly I thought you can pre determine your risk with a stop loss on some options abd aim for a significantly larger reward than what you risked is that right?

    If i can shoot for 4 times more reward than risk for instance then with some knowledge of fundamentals,technicals and the underlying asset I don't think it would be unrealistic to have an expected hit rate of 40% then id be profitable.

    I know the risk of ruin is pretty high with more than 2% risk per trade. So can't I just buy single options contracts with tight stops on smaller stocks that im watching like DRYS?
     
    #28     Apr 18, 2010
  9. Are there live contests with options on demo or real that I can look at?
     
    #29     Apr 18, 2010
  10. #30     Apr 18, 2010